Mickey maintains momentum

Disney shareholders must have kissed the right amphibian, because the iconic entertainment company is having a Princess and the Frog-level glow-up.

Today, shares jumped 3.65% after Disney proved that its revival strategy seems to have paid off:

• Q3 profit handily beat forecasts: Adjusted earnings per share came in at $2.06, up 28% year over year and beating projections of $1.86.
• Revenue rose 7% year over year to $25.25 billion, but slightly missed forecasts of $25.4 billion.
• Streaming operating income from Disney+ more than doubled year over year, showing that Disney’s once beleaguered streaming business has become a growth driver.
• Theme parks continued to be a boon for the company—revenue for the company’s experiences division, which encompasses cruises and parks, surged 10% year over year.
• Toy Story 5 was a huge hit, bringing in over $1 billion at the global box office.

“Overall, this was one of Disney’s strongest quarters in recent years because it showed multiple growth engines—parks, films, streaming, consumer products, and digital partnerships—all contributing simultaneously while free cash flow and shareholder returns continue to improve,” explained Eric Clark, portfolio manager of the LOGO ETF, in a note.

One more announcement: Disney is embracing short form video, announcing a content-sharing partnership with none other than TikTok. The deal will mean that creators on the platform can use clips tied to Disney franchises like Marvel and Star Wars. Those resulting shorts will also be available on Disney+, as well as TikTok itself.

From beast to beauty

Back in 2022, Disney was in a serious rut: Its streaming business was bleeding billions, the company’s cable networks were flailing, and costs kept mounting.

The board of directors called in a ringer: Former CEO Bob Iger, who reorganized the company to cut expenses, hiked the price of Disney+, and doubled down on the parts of the business with the most potential—theme parks and intellectual property. Just this past March, Iger passed the baton to current CEO Josh D’Amaro.

Today, it’s clear that Disney was right to trust Iger’s vision, and despite the recent spate of gains, some investors still think shares trade at an attractive price: “The stock is 13x and cheap, I still think the biggest unlock is Disney separating businesses and letting them operate as separate companies, but these big companies just struggle with simple concepts like this,” Clark wrote.

But with consumer stress, macroeconomic uncertainty, and fierce competition in streaming, it’s too soon to call this a fairytale ending.––LB